U.S. stocks fall as banks slump, investors weigh Fed speeches

U.S. stocks fell, with the Standard & Poor’s 500 Index poised for the longest retreat in a month, as financial shares slumped and investors watched speeches from Federal Reserve officials for clues on monetary policies.

Goldman Sachs Group Inc. and Citigroup Inc. declined more than 2.2% as Atlantic Equities LLP forecast a drop in fixed-income trading revenue for the biggest U.S. banks. Homebuilders slipped 1.1% as a group before Lennar Corp. and KB Home report earnings tomorrow. Apple Inc. (NASDAQ:AAPL) surged 4.9% after saying first-weekend sales of its new iPhones topped 9 million units.

The S&P 500 (CME:SPZ13) retreated 0.3% to 1,704.10 at 2:22 p.m. in New York. The benchmark gauge has lost 1.3% over three days, giving back all its gains from the Fed’s unexpected move last week to maintain stimulus levels. The Dow Jones Industrial Average slipped 29.13 points, or 0.2%, to 15,421.96. Trading in S&P 500 stocks was 2.2% above the 30-day average at this time of day.

“At some point, investors are going to say, ‘What’s underpinning this strong rally? We need some solid numbers,’” Scott Armiger, chief investment officer at Christiana Trust in Wilmington, Delaware, said in a phone interview. The firm has $6 billion under administration. Fed policy makers “are trying to neutralize the market. This time Bernanke said no tapering and they’re all running out and saying ‘wait a minute, folks, don’t get carried away.’”

The S&P 500 rose 1.3% last week, touching a record high, as the Federal Open Market Committee said at its Sept. 17-18 meeting that it will continue to buy $85 billion of assets a month, surprising economists who had forecast a reduction. The S&P 500 has gained 6.1% for the quarter and is up 20% for the year.

Fed Speakers

The central bank has left its main interest rate near zero since December 2008 and has expanded its balance sheet to a record $3.66 trillion through three rounds of stimulus. The quantitative easing program has helped the S&P 500 surge more than 150% since March 2009.

The rally has pushed equities to their highest valuations in more than three years. At a record close on Sept. 18, the S&P 500 traded at 16.5 times reported earnings, a multiple not seen since May 2010, data compiled by Bloomberg show.

Three regional bank presidents spoke today. Fed Bank of New York President William C. Dudley said policy makers must “forcefully” push against economic headwinds as the U.S. has yet to show “any meaningful pickup” in momentum. Fed Bank of Atlanta President Dennis Lockhart said monetary policy should focus on creating a more dynamic economy. Fed Bank of Dallas President Richard Fisher said the central bank harmed its credibility with the decision last week.